Is the retail out of town "in" again?

The macroeconomic scenario remains positive

In the post-Covid period, the Italian economy has proven to be more resilient than expected, with GDP growing by 1% in 2023, surpassing the average of the Eurozone, UK and Germany. This result was primarily obtained thanks to the construction sector and, especially, the services sector. Among services, the tourism sector played a crucial role, mainly due to spending by international tourists (€49 billion YTD as of November 2023). By the end of 2023, employment reached a peak, bringing unemployment down to 7.2%, the lowest level recorded since December 2008. Italian households continue to maintain one of the lowest levels of debt among European countries, with a declining debt-to-GDP ratio since 2020. In February 2024, inflation in Italy stood at 0.8%, in line with the previous month and well below the European average (3.1%). The slow deceleration of prices in many European countries could postpone the expected reversal of monetary policy to the second half of 2024.
In 2023, the Italian retail sector showed signs of recovery, with nominal sales growing both nationally and in the Eurozone. Considering different sales channels, large-scale distribution proved more resilient with a 5.3% sales growth compared to a 0.4% variation for small-scale operators. In 2024, retail spending is expected to return positive also in real terms, confirming a more solid recovery of the sector.

The E-commerce Trend

Only 51% of the Italian population uses internet for purchases, significantly lower than the European average equal to 69%, with countries like UK, Norway, and the Netherlands exceeding 90%. While e-commerce has transformed shopping habits, its use in Italy falls behind other European countries and is experiencing a deceleration in growth. The e-commerce share of total sales in Italy increased at a slower pace compared to other European countries, rising from 12% to 13% in 2023; after Spain, this is the lowest figure in Europe, where countries like UK, France, and Germany record penetration rates above 20%. Looking in detail, the share of goods in total sales fell to 65% in 2023; services, especially tourism and transportation, recorded the highest growth (+23% YoY in 2023, accounting for 35% of total e-commerce sales).

Shopping Centres in Italy

In this scenario, Italian shopping centres are experiencing an increase in footfall, although pre-Covid levels have not yet been reached (-9.2% vs. 2019). Consumers typically visit shopping malls less frequently, but their propensity to make purchases is increasing, especially in categories like personal care products and F&B, which show strong growth. The fashion sector struggles to return to pre-pandemic levels but is strongly influenced by lifestyle changes and seasonal weather conditions. The conversion rate from visitor to consumer is now higher because visitors are more focused on purchasing and this trend is reflected on revenues. In fact, turnovers are almost back to 2019 levels, but the recovery is at least partly due to high inflation.
In recent years, there has been increasing polarization between prime shopping centres with solid fundamentals and secondary centres experiencing vacancy growth. Nowadays, brands and retailers are more selective in planning new openings, choosing centres with good catchment areas and higher footfall. Landlords are focusing on diversification (healthcare, entertainment, F&B) and variety of offerings to support visitor numbers and turnover.

With reference to the neighbourhood shopping centres, other factors should be taken into consideration. Location remains crucial: the premise must be easily accessible, convenient, and provide click & collect services as it targets consumers who visit the centre multiple times a week. Another important factor is the grocery anchor, which must be locally recognized and stand out for convenience and quality.
The appeal of a shopping centre lies in its fundamentals and its ability to meet consumer needs.
Regarding investments, the liquidity for the out-of-town retail segment remains limited and primarily focused on retail warehouses and grocery stores. However, in 2023, the share of shopping centres volumes returned to growth, with approximately €150 million transacted during the year. In the coming months, we expect a recovery due to ongoing price adjustments since 2019. For investors seeking profitability, the risk-return profile of the out-of-town segment might offer some interesting opportunities in today’s market. In Italy, liquidity remains limited due to the scarcity offer of prime shopping centres on the market. However, new opportunities are emerging for products offering good KPIs, divestments and secondary assets. Risk premium could be a boost for the sector and turn it into one of the most competitive.